Donald Trump’s latest economic proposal — replacing the federal income tax with tariffs and creating an “External Revenue Service” — is nothing short of catastrophic for the United States and the rest of the world. While Trump and his allies claim this shift will create a more sustainable revenue system, in reality, it is an irresponsible, regressive policy that is designed to disproportionately harm middle- and working-class Americans while further enriching the ultra-wealthy. Here’s how this plan spells disaster for the economy, consumer prices, and international relations.
1. Inflation Will Skyrocket — And Trump Knows It
At a time when U.S. households are already struggling with years of high, corporate greed driven inflation from during the COVID-19 pandemic and its aftermath, Trump’s trade war will only make things worse. Indeed, it is already making things worse. Tariffs function as a tax on imports, and companies importing goods into the U.S. don’t foot that bill themselves. They pass the costs down to consumers, and we all know they do.
When Trump imposed tariffs during his first term, prices increased across multiple industries, including manufacturing, technology, and agriculture. This time, the effect will be even more extreme. And while Trump lied about it up and down the campaign trail claiming he would magically lower prices on day one, he now openly admits his policies will not lower prices— costs will, in fact, keep going up.
Even Trump’s allies have had to acknowledge the economic pain this will cause. Prices on essential goods — food, electronics, clothing, and even medicine and energy — will soar. The supply chain will constrict as businesses struggle to absorb additional costs, and our bank accounts will constrict as regular people foot ultimately foot the bill at the gas pump, the grocery store, and their monthly utility bills. The global market, already experiencing instability, will only become more volatile. And yet, Trump simply does not care — his priority remains enriching himself and his billionaire buddies like Elon Musk, Mark Zuckerberg, and Jeff Bezos.
2. A Regressive Tax System That Punishes The Middle Class
While the U.S. tax system is flawed and often allows the ultra-rich to exploit loopholes, at least in theory, it follows a progressive structure: the wealthy are supposed to pay a higher percentage of their income in taxes. By shifting national revenue collection entirely to tariffs, Trump is implementing a completely regressive tax system, where the burden falls overwhelmingly on the middle and working class.
Tariffs don’t care about income levels. Everyone pays the same increased prices on all the same goods. Rich people may have nice things, they may be able to buy more luxury goods like fancy cars, vacation homes, and high end dinners. But when it comes to everyday stuff a rich person generally doesn’t spend significantly more than a middle class.
Rich people may eat out restaurants more often or buy higher quality and more expensive food, sure. But they don’t eat more and buy loads more food just because they have a lot of money. They don’t buy five of every board game or video game instead of one copy. They don’t purchase ten times more dish towels than the average person just because they can. And generally speaking, having a lot more money doesn’t mean they buy a ton more gasoline than the rest of us.
This means that while the ultra-rich will barely notice the price hikes, everyday Americans will struggle to afford essential items. Meanwhile, the billionaire class — Trump’s donors and fellow oligarchs — will see their tax obligations all but disappear. And of course, that means they’ll hoard more wealth while regular people suffer.
For example, if the average person in the U.S. makes $60k per year, spends $50k per year on necessities, and 25% of that cost is for tariffs, that means they’re paying an effective tax rate of 21%. But an individual who makes $1 million per year will only be paying 1.25% of their income toward taxes. That’s over 1500% less than a middle class person is paying toward taxes in this example. And the more that rich person makes, the more the distance between those two tax rate percentages grows further and further apart.
This plan does not “free” Americans from taxes. That’s a boldfaced lie. Instead, it significant shifts the tax burden downward while letting the rich almost completely off the hook.
3. American Businesses Will Suffer from Retaliatory Tariffs
The idea that tariffs are “paid” by foreign companies is a myth. When the U.S. imposes tariffs, other countries retaliate, which directly harms American industries. Canada has already retaliated with it’s own set of tariffs on U.S. imports. And at least three Canadian provinces have announced they are pulling U.S.-made liquor off their shelves completely in response to Trump’s trade war, a move that hurts red states in particular. It’s only been two days. This is only the beginning.
When Trump waged trade wars during his first term, American farmers, manufacturers, and exporters suffered as China, Canada, and Europe imposed retaliatory tariffs on U.S. goods. Soybean farmers lost billions when China cut off their supply chain. The auto industry was slammed with higher production costs. This time, the damage will be even greater, as Trump’s new tariffs target Canada and Mexico — two of America’s largest trading partners.
4. The “External Revenue Service” Is a Corrupt Power Grab
Trump’s proposed “External Revenue Service” is a thinly veiled scheme to consolidate financial control under a new bureaucracy that will operate with even less transparency than the IRS. By eliminating income tax collection and centralizing revenue under a tariff-based system, Trump and his allies will have unprecedented control over government finances, allowing them to manipulate economic policy to benefit themselves and their donors. Indeed they’re already making other moves to wrest control the nation’s finances away from bureaucratic systems designed to help ensure checks and balances. For example, in a play right out of the playbook for dictators, Musk’s fascist “Department of Government Efficiency” has raided and wrested control of the nation’s payment systems away from the Office of Management and Budget. Following that, Musk announced that he is breaking contracts by halting payments to U.S. contractors.
This move is frighteningly reminiscent of authoritarian regimes that centralize financial power to benefit elites while gutting social services for the working class. Trump’s “ERS” would not be a relief for taxpayers — it would be a tool for economic manipulation and corporate favoritism.
5. The Global Economy Will Enter a Trade War Spiral
Trump’s tariffs on Canada, Mexico, and China will not occur in isolation. They’ve already begun to trigger retaliation from Canada and Mexico. And they will likely trigger an economic domino effect, with even more countries imposing their own tariffs in retaliation. This kind of protectionist policy historically leads to trade wars, recession, and global financial instability.
- American companies that rely on imported materials will face skyrocketing costs.
- U.S. exports will become less competitive as foreign markets impose counter-tariffs.
- The U.S. dollar could weaken as investor confidence in the American economy falters.
For better and for worse, the world economy is deeply interconnected. Trump’s short-sighted trade war will cause ripple effects that will harm global supply chains, disrupt commerce, and ultimately shrink economic growth worldwide.
A Global Disaster in the Making
Trump’s tariff plan is an economic disaster disguised as a populist policy. It will raise prices, punish consumers, and shift the tax burden onto the middle and working class while giving billionaires an easy escape. At a time when Americans are already facing financial uncertainty, this reckless trade war will only deepen the divide between the wealthy elite and struggling families.
Trump has made it clear that he doesn’t care if this plan hurts Americans — his focus is on self-enrichment and corporate favoritism. If enacted, his tariff-based taxation system will further erode economic stability, leaving everyday citizens to pay the price for his disastrous policies.
